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OEE: Overall Equipment Effectiveness
Oh "Equipment Effectiveness", I've heard about that before!
Unfortunately, in many facilities, that's all OEE (Overall Equipment Effectiveness) is to
the personnel. Something they heard of, talked about or read about. Many maintenance
management departments today still do not effectively utilize the OEE tool even though
it's widely used among the world class companies.
Definition of OEE: Overall Equipment Effectiveness
The overall performance of a single piece of equipment or even an entire factory, will always
be governed by the cumulative impact of the three OEE factors: Availability, Performance
Rate and Quality Rate.
OEE is a percentage derived by multiplication of the three ratios for the factors mentioned
above. The OEE percentage is used for analysis and benchmarking.
In speaking with Mike Sondalini (Best Practice Facilitator/Author) about a similar topic - Root Cause
Analysis (RCA), Mike makes a statement I think identifies one of the main barriers to successful OEE
Mike: "I must admit that a lot of people know of RCA and its implications but very few people use it. I
think it's because they aren't able to convince enough of the right people at their work place to try it and
then to stick with it."
In my experience, OEE has had better coverage than the other analysis tools like RCA
or Fault Tree Analysis (FTA). This may be due to the fact that Overall Equipment
Effectiveness is also a benchmarking tool as well as an analysis tool. In an attempt to
grow the numbers who profit from using OEE, I will go over what OEE is, why you
should use OEE, and how to use it.
What is OEE?
OEE = Availability X Performance Rate X Quality Rate
Availability - Percent of scheduled production (to measure reliability) or calendar hours 24/7/365 (to
measure equipment utilization), that equipment is available for production.
Note: measures the percent of time that the equipment can be used (usually total hours
of 24-7-365), divided by the equipment uptime (actual production).
Performance Rate - Percent of parts produced per time frame, of maximum rate OEM rated
production speed at. If OEM specification is not available, use best known production rate.
Note: Performance efficiency is the percentage of available time that the equipment is producing product
at its theoretical speed for individual products. It measures speed losses. (e.g., inefficient batching,
Quality Rate - Percent of good sellable parts out of total parts produced per time frame.
Note: Determining the percent of the total output that is good. (i.e. all products including production,
engineering, rework and scrap.)
Example: 50% Availability (0.5) X 70% Performance Rate (0.7) X 20% Quality Reject
Rate (results in 80%(0.8) acceptable) = 30%OEE (Please see
www.DowntimeCentral.com/OEE_TEEP.htm for a free online calculator to practice
Why use OEE?
Overall Equipment Effectiveness (OEE) can be used to save companies from making
inappropriate purchases, and help them focus on improving the performance of
machinery and plant equipment they already own. OEE is used to find the greatest
areas of improvement so you start with the area that will provide the greatest return on
asset. The OEE formula will show how improvements in changeovers, quality, machine
reliability improvements, working through breaks and more, will affect your bottom line.
As you strive towards World Class productivity in your facility, this simple formula will
make an excellent benchmarking tool. The derived OEE percentage is easy to
understand and displaying this single number where all facility personnel can view it,
makes for a great motivational technique. By giving your employees an easy way to see
how they are doing in overall equipment utilization, production speed, and quality, they
will strive for a higher number!
I highly recommend using an automated equipment monitoring system with an LCD
display for your OEE in each respective area of your facility so all can monitor. To the
employee in each area, it will become as common to glance at, as the speedometer on
a car. While showing machine speed with such a display helps, machine speed is only a
small percentage of your overall equipment effectiveness - OEE.
How to use OEE?
Implementing the Overall Equipment Effectiveness formula in your facility can take on
many different forms. It can be used as an analysis and benchmarking tool for either
reliability, equipment utilization, or both. Don't let indecision on how to best use OEE
become a barrier that prevents you from using it at all. Start out small if necessary,
picking your bottleneck to collect the OEE metrics on.
Once you see first hand what a valuable tool it is, you can gradually take OEE
measurements on other equipment in your facility. If you work in manufacturing , there
is no substitute for going out to the shop floor and taking some rough measurements of
OEE. You will be surprised by what you find!
While monitoring OEE per equipment brings focus on the equipment itself, it may not
provide true cause of major costs, unless the cause is obvious. For example OEE can
appear improved by actions such as purchasing oversize equipment, providing
redundant supporting systems, and increasing the frequency of overhauls.
To improve your OEE percentage, you will need to use other tools and methodologies
available to you, like TDC, RCA, FTA etc. TDC is a relatively new methodology that
focuses on True Downtime Cost for justification and making better management
decisions. You can learn more about TDC at www.downtimecentral.com/tdc.htm. TDC
overcomes the main implementation barrier for OEE by giving maintenance managers a
tool in which to show actual cost savings in relationship with OEE.
For the ultimate decision making tool, incorporate OEE with TDC.
Front End: Incorporate TDC into your data collection. (contact me for a free power
Back End: Incorporate TDC into your software reporting by requiring it of your
On a larger scale, you should not only be calculating equipment OEE, you should also
be calculating a production line OEE, and within a corporation, a facility OEE. Factory
automation companies are starting to incorporate OEE into the reports they generate
automatically! There are also a few companies who specialize in providing shop floor
data in automatic easy to read OEE reports. If you would like more information or
recommendations on companies that can get your automated OEE system up and
running, please contact me at bin95 @ bin95.com, I'll be happy to recommend a
About the Author: Don Fitchett is President of Business Industrial Network and author
of several manufacturing cost analysis articles published in industry related journals and
websites. Please feel free to copy and pass along this article as long as all credits are